Nvidia (NVDA +1.63%) has been taking a beating so far this year. Shares have plunged nearly 30% year to date as of this writing. Yet the stock is still higher by more than 27% over the past 12 months.
The artificial intelligence (AI) leader remains one of the largest companies by market cap, valued at about $2.4 trillion. The question for investors is whether Nvidia stock can regain its momentum and return the company to a valuation of $3 trillion or beyond. I believe it can, and I think one key date to watch is coming up on May 1.
NASDAQ: NVDA
Key Data Points
Is AI demand eroding?
The decline in Nvidia shares in recent months has had several forces behind it. Most obvious was the stock's more than 800% return over the two-year period ending Dec. 31, 2024. It's natural for some investors to want to protect those gains. Trying to time stock prices can be hazardous to one's financial health, though. Long-term investments are better left untouched if the company's underlying business prospects remain strong.
That brings us to another headwind for Nvidia stock. Uncertainty related to tariffs and general demand for AI infrastructure. The company was recently forced to take a $5.5 billion charge as the U.S. government placed indefinite restrictions on its H20 chip sales to China. Those chips were specifically designed for the Chinese market, and that business will inevitably be filled by other, potentially domestic, Chinese chip suppliers.
Image source: Getty Images.
While China sales are important for Nvidia, they only represented about 13% of total revenue in fiscal year 2025. More critical is the trajectory of demand for its AI products from major tech companies like Microsoft, Amazon, and others.
Investors will know more by May 1
That is also now coming into question. Recent reports have reiterated a Wells Fargo analyst note saying that Amazon Web Services (AWS) has delayed prior plans for new data center leases. Microsoft, another large cloud infrastructure provider, has made similar decisions to slow data center expansion, according to the analysts.
That comes after plans to aggressively expand cloud infrastructure capacity with hundreds of billions of dollars in capital spending for Nvidia's GPU hardware had been announced by several companies. Others, including xAI and Meta, appear to be continuing with growth plans.
Amazon CEO Andy Jassy had previously told CNBC that he didn't expect to cut back on capital spending for data center compute capacity. That's why investors need to mark May 1 on their calendars. Amazon is scheduled to report its first-quarter earnings on that date. Microsoft will be providing its quarterly update the day prior.
Nvidia is now priced right
Amazon AWS vice president of global data centers Kevin Miller called any modification in plans "routine capacity management." If the companies reiterate that capital spending plans are basically on track, investors could pour back into Nvidia stock after its recent plunge.
Nvidia's price-to-earnings (P/E) ratio is now near a three-year low based on current fiscal year earnings estimates.
NVDA PE Ratio (Forward) data by YCharts
The long-term growth of AI doesn't look to be hitting a wall. Enterprises, as well as consumers, should increase use. And Nvidia isn't just making money on AI hardware. It has robust software architecture offerings that companies are buying. It also has a fast-growing robotics and assisted driving segment.
Business spending could fluctuate. An economic slowdown or even recession could delay the pace of AI expansion. In the end, though, Nvidia remains the sector leader. I suspect long-term investors will look back on its recent stock price as a fine investment opportunity.
